The Dangers of Title Loans & Why You Should Avoid Them

A title loan is a form of short-term lending in which you give the title of your car as collateral in return for a loan. The lender gets authority to take your car as payment should you fail to pay the loan within the stipulated time.

The loan is payable as a lump sum, usually 30 days later or spread out in installments over a period of 3-6 months. A balloon payment is usually paid at the end of the loan term.

Title loans do not require a credit check or proof of income plus they can be processed super fast, you can literally walk in with your car title and walk out with cash. Sounds appealing right? Except they are not! If you are thinking of getting one, here are several reasons why you should steer clear of title loans.

You may Lose Your Car

Say No to Title LoansSay No to Title LoansThis is as plain as it sounds. When you put up your car as collateral for a loan, failure to repay gives the lender rights over your car. According to Consumer Financial Protection Bureau (CFPB), 1 out of 5 cars used for title loans end up being repossessed.

This means that you have a 20% risk of losing your car with a title loan. How many aspects of your life will be affected by this?

You Risk Increasing the Cost of Borrowing for up to 3 Times your Initial Loan

The (APR), Annual Percentage Rate of title loans averages at 300%. APR translates to the amount of money in percentage that your loan will cost you if it was outstanding for a year.

If you are unable to pay your loan by the end of the loan term, you can have your car repossessed or request to have a roll-over. A roll-over translates to extended payment period at an extra fee.

With more amounts to pay now, you may have to keep on rolling over your loan. If you do it for up to a year, the accumulated cost of your loan in interest and rates can add up to 300% which translates to 3 times what you borrowed.

It Puts you into a Cycle of Debts

A Car Title Lending report by CFPB states that only 12% of title loan debtors are able to pay without renewing their loans. If you end up in the 88%, this means that you will have to either keep renewing your loan or opt to re-borrow in order to keep your car and pay either part or all of the accumulating debt.

CFPB also did an analysis on 3.5 Million single payment title loans given to more than 400,000 borrowers between 2010 and 2013. The report showed that 1 out of 3 borrowers defaulted. Of the remaining ones, 1 out of 3 renewed their loans up to 7 or more times.

The same analysis showed that loans that were re-borrowed on the same day that previous ones were repaid accounted for 83%. If you find yourself in such situations, you will be in caught up in a cycle of debts that goes on and on.

You might still be in Debt if your Repossessed Car fetches Less!

If you thought losing your car is the worst that can happen; you’ve got another thing coming! Before you are given the loan, your car is valued. Failure to pay leads to repossession after which it is put up for sale. There are instances when the car is sold for less than its value.

This can happen if the market value of the car goes down or if the lender fails to find a buyer who can buy it at the original price. They sell it to the highest bidder and in some states; you are required to assume the balance. On the other hand, if the car fetches more, you may not get the surplus depending on the state that you come from.

The Take Away

While taking a title loan is a decision you get to make on your own or as a family, it is important to weigh the risks against the benefits of such a decision. There must be a very good reason why 25 states have banned title loans. Be informed and make the right decision.

Source: creditabsolute.com

What is a Cashback Credit Card?

Some things in life sound too good to be true, and getting cash back for purchases may seem like one of those deals. But an increasing number of credit cards, called cashback cards, offer clients money back when they charge what they buy.

Many people are familiar with the concept of credit card rewards, when lenders give clients a little something back—points, airline miles—as an incentive for using their card.

In the case of cashback cards, that reward is, well, cash.

How Does Cash Back Work?

Cashback credit cards reward clients based on their spending, providing a credit that is a small percentage of the total purchase.

If a cashback card provides 1% back, for instance, the cardholder would generally earn 1 cent on every dollar spent, or $1 for every $100 they charge to their card. If, over the course of the year, a person charges $10,000 in purchases to their cashback credit card, they’d earn $100 in cash back for that time period.

best type of credit card will ultimately depend on the individual. Here are some things to consider.

Rate of Cash Back

Not all cashback credit cards offer the same rate of return, so it’s best to comparison-shop. Though differences in percentages may sound negligible, getting 2% instead of 1% means double the cash back—and those small amounts can add up over time.

Some credit cards also provide different rates of cash back depending on the spending category or how much money the cardholder charges in a year. For example, some credit cards may provide a higher percentage on expenditures such as gas, travel, or groceries and a different rate for other types of purchases.

Tiered cashback cards may provide a higher (or even lower) rate when annual purchases exceed various thresholds.

Some credit cards also offer higher introductory cashback rates.

What is a Good APR?

Redemption Terms

A good question to ask a lender before signing up for a cashback credit card is “Where can I get cash back?” The terms of redemption can vary across credit card products.

In some cases, cardholders may see an annual one-time credit for the full amount earned. Other cards allow cardholders to redeem their cash back at any time.

Tips for Getting the Most Out of a Cashback Card

While signing up for—and using—a cashback credit card is the first step to getting money back on everyday purchases, there are some ways to optimize the returns.

Pay Off Your (Whole) Credit Card Bill on Time

With few exceptions, credit card charges are not subject to interest until after the statement payment due date. But after that payment becomes due, extra interest and fees can quickly add up—erasing any cashback benefits.

Optimize Redemptions

When it comes to redeeming cash back, it’s worth seeking the biggest bang for your buck.

If a card offers different rates of cash back depending on how rewards are redeemed, being strategic when cashing out can result in a greater windfall.

Consider Extra Fees

Though a cashback credit card can make it tempting to charge everything you buy, that’s not always the most cost-effective strategy.

Though it’s generally an exception, some merchants impose surcharges for using a credit card or may provide discounts for paying in cash. In such cases, it’s a good idea to crunch the numbers to ensure the extra fees don’t actually cost more than the cashback reward.

The Takeaway

Free money may be hard to come by—but not if you use a cashback credit card. When choosing a card, It’s best to look at the rate of cash back, any annual fee a card may charge, and the APR if you carry a balance.

SoFi cardholders earn 2% unlimited cash back when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back when redeemed for a statement credit.1

Plus, there is no annual fee*.

Look into the cashback rewards of a SoFi credit card today.


1See Rewards Detailswww.sofi.com/card/rewards
*See Pricing, Terms & Conditions at SoFi.com/card/terms
The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
SOCC21003

Source: sofi.com

4 Tips Before You Buy Your Teenager a Car

Roughly 26% of car buyers feel that they overpaid for their vehicle, according to a 2014 survey from TrueCar, Inc. That same survey admittedly also found consumers believe car dealers make about five times more profit on the sale of a new car than they actually do — but whether you truly paid too much for your now-old ride or you simply think you did, there are ways to save the next time you hit up a car dealership. For starters, the rates on auto loans are largely driven by your credit, so simply bolstering your credit score can potentially save you thousands of dollars over the life of your loan. Plus, it never hurts to comparison shop and negotiate when it comes to auto loans and the actual vehicle itself — you may be missing out on savings by doing one and not the other.

But First… How Much Car Can You Afford?

According to Credit.com contributor and car insurance comparison company TheZebra, automotive experts generally suggest auto loans not exceed 10% (if it’s just the loan) to 20% (if it’s the loan and related expenses like car insurance) of your gross monthly income. Of course, that’s a broad rule and every potential car owner is going to have to take a long, hard long at their finances and current debt levels to decide what they can, in fact, afford. Following these three simple cost-cutting steps can help you save big on your auto loan and next car purchase.

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1. Do a Credit Check

Not checking your credit before you start shopping for a car is a huge mistake. Because your auto loan rates are directly tied to your credit scores, even a small inaccuracy on your credit report could cost you. Before you start shopping for your dream car, take an hour to check all three of your credit reports and credit scores online. You need to check with all three major credit reporting agencies — Equifax, Experian and TransUnion — because you don’t know which one a lender will use for your application. If you have a credit score above 750, you can probably qualify for the best rates available and negotiate an excellent deal on your car. If your credit score is lower, see if you can give it a boost before you apply for a loan.

You can view two of your credit scores, along with your free credit report snapshot on Credit.com. The snapshot will pinpoint what your specific area of opportunities are and what steps you can take to improve. However, as a general rule of thumb, you can raise your credit score by disputing errors on your credit report, paying down high credit card debts and limiting new credit applications.

2. Shop Online

Unless you have a credit score in the 800s and can qualify for a 0% auto loan offer, you are probably not going to get the best deal on a loan from the dealership. Auto loan rates and fees offered by online auto lenders are usually a lot lower than the rates offered by dealership financing programs. Plus, you can shop and compare rates online without causing damaging inquiries to your credit report (provided you’re not formally applying for every offer you see). Most online lenders have calculators or rate guides that show you what rate you could receive based upon your credit score. (Note: Be sure to vet any lender, whether online or within a dealership, before taking them up on an offer.)

With many online loans, you fill out the application and receive an approval by email within a few hours. Then the lender mails you a check that is ready to be made out to the person or business selling the car. If you end up not buying a car or not using the loan, you toss the check (shredding it first, of course). Plus, the check from the lender usually specifies a certain price range (for example, $9,000-$10,000). This leaves you with some room for negotiating a lower price with the seller even after you have received your loan approval. Speaking of which …

3. Negotiate the Price

Many people may wind up overpaying for a car simply to avoid negotiating the price of a car with a salesperson. Luckily, the Internet makes negotiating with car dealers a whole lot easier. Before you start shopping, look up the listed price, invoice and MSRP of the car you want through an unbiased site like Kelley Blue Book and request free price quotes online. Armed with these facts, you’ll have an advantage over the salesperson when you start the negotiations. You should be able to save a couple hundred dollars, if not a few thousands, by negotiating with the car salesperson before you decide to buy.

Proving It

You may be thinking: This is all fine and dandy, but does it really add up to $3,000 in savings? Let’s crunch the numbers using this auto loan calculator.

According to data from Experian, the average interest rate on a new car loan for prime customers as of the last quarter of 2015 was 3.55%. The average rates on a new car for non-prime customers and subprime customers during that timeframe were 6.24% and 10.36%, respectively.

So, let’s say you wanted to buy a $16,000 car and had $1,000 saved for a down payment. If you chose a loan repayment period of 60 months, had a non-prime credit score (think just below 700), and got a loan through a dealership, you could receive about a 6.3% annual percentage rate (APR).

  • Dealership option: $292 a month – $17,525 total costs

However, if you checked your credit reports and scores before you applied and found a way to boost your score to prime (think around 750), your interest rate from the dealership could drop to about 3.5%.

  • Improved score: $273 a month – $16,373 total costs

You would have already saved $1,152 dollars, just by checking your credit reports! That’s a pretty good return on your investment. Next, you might be able to reduce your rate even more by shopping for a loan online with your new credit score of 750. Let’s suppose, for argument sake, you qualify for a 2.7% APR (the average interest rate for super-prime customers during the last quarter of 2015, according to Experian).

  • Online loan: $268 a month – $16,052 total costs

You would have saved almost $1,473 by working on your loan options using Step 1 and 2. Finally, if you went to negotiate with the salesperson you could probably make a deal with the seller to reduce the price of the car down to $14,000. In this case, you would only have to borrow $13,000 with your 2.7% APR loan from an online lender.

  • Negotiated deal: $232 a month – $13,912 total costs

Your total savings from following these three simple steps would equal $3,613 over the life of your auto loan!

Source: credit.com

The Secret to Beating a Car Dealer

Roughly 26% of car buyers feel that they overpaid for their vehicle, according to a 2014 survey from TrueCar, Inc. That same survey admittedly also found consumers believe car dealers make about five times more profit on the sale of a new car than they actually do — but whether you truly paid too much for your now-old ride or you simply think you did, there are ways to save the next time you hit up a car dealership. For starters, the rates on auto loans are largely driven by your credit, so simply bolstering your credit score can potentially save you thousands of dollars over the life of your loan. Plus, it never hurts to comparison shop and negotiate when it comes to auto loans and the actual vehicle itself — you may be missing out on savings by doing one and not the other.

But First… How Much Car Can You Afford?

According to Credit.com contributor and car insurance comparison company TheZebra, automotive experts generally suggest auto loans not exceed 10% (if it’s just the loan) to 20% (if it’s the loan and related expenses like car insurance) of your gross monthly income. Of course, that’s a broad rule and every potential car owner is going to have to take a long, hard long at their finances and current debt levels to decide what they can, in fact, afford. Following these three simple cost-cutting steps can help you save big on your auto loan and next car purchase.

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1. Do a Credit Check

Not checking your credit before you start shopping for a car is a huge mistake. Because your auto loan rates are directly tied to your credit scores, even a small inaccuracy on your credit report could cost you. Before you start shopping for your dream car, take an hour to check all three of your credit reports and credit scores online. You need to check with all three major credit reporting agencies — Equifax, Experian and TransUnion — because you don’t know which one a lender will use for your application. If you have a credit score above 750, you can probably qualify for the best rates available and negotiate an excellent deal on your car. If your credit score is lower, see if you can give it a boost before you apply for a loan.

You can view two of your credit scores, along with your free credit report snapshot on Credit.com. The snapshot will pinpoint what your specific area of opportunities are and what steps you can take to improve. However, as a general rule of thumb, you can raise your credit score by disputing errors on your credit report, paying down high credit card debts and limiting new credit applications.

2. Shop Online

Unless you have a credit score in the 800s and can qualify for a 0% auto loan offer, you are probably not going to get the best deal on a loan from the dealership. Auto loan rates and fees offered by online auto lenders are usually a lot lower than the rates offered by dealership financing programs. Plus, you can shop and compare rates online without causing damaging inquiries to your credit report (provided you’re not formally applying for every offer you see). Most online lenders have calculators or rate guides that show you what rate you could receive based upon your credit score. (Note: Be sure to vet any lender, whether online or within a dealership, before taking them up on an offer.)

With many online loans, you fill out the application and receive an approval by email within a few hours. Then the lender mails you a check that is ready to be made out to the person or business selling the car. If you end up not buying a car or not using the loan, you toss the check (shredding it first, of course). Plus, the check from the lender usually specifies a certain price range (for example, $9,000-$10,000). This leaves you with some room for negotiating a lower price with the seller even after you have received your loan approval. Speaking of which …

3. Negotiate the Price

Many people may wind up overpaying for a car simply to avoid negotiating the price of a car with a salesperson. Luckily, the Internet makes negotiating with car dealers a whole lot easier. Before you start shopping, look up the listed price, invoice and MSRP of the car you want through an unbiased site like Kelley Blue Book and request free price quotes online. Armed with these facts, you’ll have an advantage over the salesperson when you start the negotiations. You should be able to save a couple hundred dollars, if not a few thousands, by negotiating with the car salesperson before you decide to buy.

Proving It

You may be thinking: This is all fine and dandy, but does it really add up to $3,000 in savings? Let’s crunch the numbers using this auto loan calculator.

According to data from Experian, the average interest rate on a new car loan for prime customers as of the last quarter of 2015 was 3.55%. The average rates on a new car for non-prime customers and subprime customers during that timeframe were 6.24% and 10.36%, respectively.

So, let’s say you wanted to buy a $16,000 car and had $1,000 saved for a down payment. If you chose a loan repayment period of 60 months, had a non-prime credit score (think just below 700), and got a loan through a dealership, you could receive about a 6.3% annual percentage rate (APR).

  • Dealership option: $292 a month – $17,525 total costs

However, if you checked your credit reports and scores before you applied and found a way to boost your score to prime (think around 750), your interest rate from the dealership could drop to about 3.5%.

  • Improved score: $273 a month – $16,373 total costs

You would have already saved $1,152 dollars, just by checking your credit reports! That’s a pretty good return on your investment. Next, you might be able to reduce your rate even more by shopping for a loan online with your new credit score of 750. Let’s suppose, for argument sake, you qualify for a 2.7% APR (the average interest rate for super-prime customers during the last quarter of 2015, according to Experian).

  • Online loan: $268 a month – $16,052 total costs

You would have saved almost $1,473 by working on your loan options using Step 1 and 2. Finally, if you went to negotiate with the salesperson you could probably make a deal with the seller to reduce the price of the car down to $14,000. In this case, you would only have to borrow $13,000 with your 2.7% APR loan from an online lender.

  • Negotiated deal: $232 a month – $13,912 total costs

Your total savings from following these three simple steps would equal $3,613 over the life of your auto loan!

Source: credit.com

More Americans With Bad Credit Are Getting Auto Loans

Roughly 26% of car buyers feel that they overpaid for their vehicle, according to a 2014 survey from TrueCar, Inc. That same survey admittedly also found consumers believe car dealers make about five times more profit on the sale of a new car than they actually do — but whether you truly paid too much for your now-old ride or you simply think you did, there are ways to save the next time you hit up a car dealership. For starters, the rates on auto loans are largely driven by your credit, so simply bolstering your credit score can potentially save you thousands of dollars over the life of your loan. Plus, it never hurts to comparison shop and negotiate when it comes to auto loans and the actual vehicle itself — you may be missing out on savings by doing one and not the other.

But First… How Much Car Can You Afford?

According to Credit.com contributor and car insurance comparison company TheZebra, automotive experts generally suggest auto loans not exceed 10% (if it’s just the loan) to 20% (if it’s the loan and related expenses like car insurance) of your gross monthly income. Of course, that’s a broad rule and every potential car owner is going to have to take a long, hard long at their finances and current debt levels to decide what they can, in fact, afford. Following these three simple cost-cutting steps can help you save big on your auto loan and next car purchase.

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1. Do a Credit Check

Not checking your credit before you start shopping for a car is a huge mistake. Because your auto loan rates are directly tied to your credit scores, even a small inaccuracy on your credit report could cost you. Before you start shopping for your dream car, take an hour to check all three of your credit reports and credit scores online. You need to check with all three major credit reporting agencies — Equifax, Experian and TransUnion — because you don’t know which one a lender will use for your application. If you have a credit score above 750, you can probably qualify for the best rates available and negotiate an excellent deal on your car. If your credit score is lower, see if you can give it a boost before you apply for a loan.

You can view two of your credit scores, along with your free credit report snapshot on Credit.com. The snapshot will pinpoint what your specific area of opportunities are and what steps you can take to improve. However, as a general rule of thumb, you can raise your credit score by disputing errors on your credit report, paying down high credit card debts and limiting new credit applications.

2. Shop Online

Unless you have a credit score in the 800s and can qualify for a 0% auto loan offer, you are probably not going to get the best deal on a loan from the dealership. Auto loan rates and fees offered by online auto lenders are usually a lot lower than the rates offered by dealership financing programs. Plus, you can shop and compare rates online without causing damaging inquiries to your credit report (provided you’re not formally applying for every offer you see). Most online lenders have calculators or rate guides that show you what rate you could receive based upon your credit score. (Note: Be sure to vet any lender, whether online or within a dealership, before taking them up on an offer.)

With many online loans, you fill out the application and receive an approval by email within a few hours. Then the lender mails you a check that is ready to be made out to the person or business selling the car. If you end up not buying a car or not using the loan, you toss the check (shredding it first, of course). Plus, the check from the lender usually specifies a certain price range (for example, $9,000-$10,000). This leaves you with some room for negotiating a lower price with the seller even after you have received your loan approval. Speaking of which …

3. Negotiate the Price

Many people may wind up overpaying for a car simply to avoid negotiating the price of a car with a salesperson. Luckily, the Internet makes negotiating with car dealers a whole lot easier. Before you start shopping, look up the listed price, invoice and MSRP of the car you want through an unbiased site like Kelley Blue Book and request free price quotes online. Armed with these facts, you’ll have an advantage over the salesperson when you start the negotiations. You should be able to save a couple hundred dollars, if not a few thousands, by negotiating with the car salesperson before you decide to buy.

Proving It

You may be thinking: This is all fine and dandy, but does it really add up to $3,000 in savings? Let’s crunch the numbers using this auto loan calculator.

According to data from Experian, the average interest rate on a new car loan for prime customers as of the last quarter of 2015 was 3.55%. The average rates on a new car for non-prime customers and subprime customers during that timeframe were 6.24% and 10.36%, respectively.

So, let’s say you wanted to buy a $16,000 car and had $1,000 saved for a down payment. If you chose a loan repayment period of 60 months, had a non-prime credit score (think just below 700), and got a loan through a dealership, you could receive about a 6.3% annual percentage rate (APR).

  • Dealership option: $292 a month – $17,525 total costs

However, if you checked your credit reports and scores before you applied and found a way to boost your score to prime (think around 750), your interest rate from the dealership could drop to about 3.5%.

  • Improved score: $273 a month – $16,373 total costs

You would have already saved $1,152 dollars, just by checking your credit reports! That’s a pretty good return on your investment. Next, you might be able to reduce your rate even more by shopping for a loan online with your new credit score of 750. Let’s suppose, for argument sake, you qualify for a 2.7% APR (the average interest rate for super-prime customers during the last quarter of 2015, according to Experian).

  • Online loan: $268 a month – $16,052 total costs

You would have saved almost $1,473 by working on your loan options using Step 1 and 2. Finally, if you went to negotiate with the salesperson you could probably make a deal with the seller to reduce the price of the car down to $14,000. In this case, you would only have to borrow $13,000 with your 2.7% APR loan from an online lender.

  • Negotiated deal: $232 a month – $13,912 total costs

Your total savings from following these three simple steps would equal $3,613 over the life of your auto loan!

Source: credit.com

How Does a Credit Score Affect your Mortgage Rate?

Among the things that lenders look at when you make a mortgage application is your credit score. It determines whether you qualify for the loan or not. It also plays a big role on the principal amount and interest rates.

Typically, a high score translates to healthy financial management hence lower risk of defaulting. This gets you better rates. On the other hand, a low score represents mismanagement of credit. This makes you more likely to default and lenders will offer higher rates to minimize the risk.

Credit Score RangesCredit Score Ranges

Credit Score Ranges

To better understand how credit score affects your mortgage rates, let’s look at FICO credit score. This is the credit rating system used by majority of lenders across US. It uses your credit reports data from the main credit bureaus; Experian, Equifax and TransUnion to come up with a 3-digit figure. From this, your rate is determined from a 6 tier system that grades credit scores out a possible 850 points.

Using a 30-year fixed mortgage as an example, here is how rates compare across the different tiers;

Tier One (760-850)

A borrower in this range represents lowest risk to lenders. The tier represents exceptional credit management. You get to enjoy the best rate there is in the market as of today; Annual Percentage Rate also known APR, of 4.204%.

Tier Two (700-759)

If your score falls on this tier, then you are very good at managing your finances. It shows that you are a dependable borrower. This gets you an APR of 4.426%.

Tier Three (680-699)

The national average of 695 falls under this tier. A score in this range is considered as good. Borrowers in this range will easily get their loan application approved though at average rates. From the example, most lenders will offer the loan at about 4.603% APR.

Tier Four (660-679)

Scores that fall within this range are considered fair. While most lenders will agree to the mortgage application, it will be at a much higher rate compared to the upper tiers (4.817%). The loan will also come at much stringent terms like a heftier down payment. Borrowers in this category will have to do more shopping around if they wish to land lenders with competitive rates.

Tier Five (640-659)

Mortgages in the upper tiers are known in the industry as prime loans. Those that fall in tier five and below are referred to as Subprime Mortgages. The Consumer Financial Protection Bureau (CFPB) defines them as ‘a loan that is meant to be offered to prospective borrowers with impaired credit records’.

Borrowers whose score falls on this tier are considered potential defaulters. Their mortgages present considerable risk to the lenders. To mitigate this risk, the loans come with stringent terms. This may include measures such as co-signing and collateral.

Apart from attracting considerably higher rates than the national average, subprime loans can be more restrictive. Most will be offered as adjustable rate mortgages (ARMs); their APR can change outstandingly in the course of the loan term.

Tier Six (620-639)

Scores in this tier will get you the lowest rates; that would be 5.793% for the 30-year mortgage. Qualifying will be difficult and if approved, you will be required to have a co-signer as well as collateral. You may also have to do with an APR loan.

Credit Scores Below 620

Conventional lenders will not offer loans to borrowers whose score is below tier six. However, borrowers in this category can qualify for FHA mortgages. These come at smaller down payments (3.5%) and potentially lower interest rates. They are however restrictive on the maximum amount that one can borrow. They also attract a higher Private Mortgage Insurance (PMI) than conventional mortgages.

How Rates Compare

To put this into perspective, consider a 30-year $250,000 fixed mortgage with a 20% down payment. Let’s see how different rates compare in reference to the top tier scores.

Credit Score Range APR Monthly Payment Total Interest Difference
760-850 4.20% $1,223 $190,325 (best rate)
700-759 4.43% $1,255 $202,068 $11,743
680-699 4.60% $1,282 $211,541 $21,216
660-679 4.82% $1,314 $223,124 $32,799
640-659 5.25% $1,380 $246,816 $56,491
620-639 5.79% $1,465 $277,676 $87,351

The Take Away

From the above information its evident that credit scores greatly affects mortgage rates. An upward bump from a low score can save you tens of thousands of dollars in the long run. At the same time, lenders can increase your monthly repayments even during the loan repayment period. This will be occasioned by a significant drop in your credit score.

Source: creditabsolute.com

Debt collection laws: know your rights – Lexington Law

Debt Collection Laws Title Image

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Debt collection laws exist to protect consumers from unfair debt collection practices. The inception of collection agencies brought with it a prevalence of abusive and deceptive debt collection practices among collectors. 

Since then, a federal law called the Fair Debt Collection Practices Act (FDCPA) was enacted to combat abusive and unethical behavior by debt collectors. The FDCPA places certain limitations on debt collectors and the methods they use to contact debtors. 

It’s important to know your rights and what a debt collector can and cannot do by law. If you’re being contacted by a debt collector, you can protect yourself by understanding what’s within their limitations and what’s not. 

The Fair Debt Collection Practices Act: what are the rules for debt collectors?

People often misunderstand exactly who the FDCPA applies to. The law targets third-party debt collectors: Collection agencies, debt buyers and lawyers who practice debt collection as part of their business are all considered third-party debt collectors. 

The FDCPA covers debts such as mortgages, credit card debt, medical debt, student loans and auto loans. The law outlines the specific limitations of how a debt collector can contact you, and if violated, a lawsuit is warranted within a year against the collector or collection agency. 

When and how debt collectors can contact you, and can a debt collector call you at work?

  • Time: Collection agencies can contact you by phone, mail, fax or email. Debt collectors aren’t permitted to call you at unusual times—they can only call you between 8 a.m. and 9 p.m. your local time. Any contact outside of those hours is an FDCPA violation. 
  • Place: Debtors also can’t contact you in unusual places, such as hospitals, schools or restaurants. While they’re technically allowed to call you at your home or your office, you have the right to tell them not to contact you at your workplace. Similarly, if they know personal calls aren’t permitted at your place of work, they can’t legally contact you while you’re there. 
  • Representation by attorney: If you have an attorney to represent you and a debt collector knows this, they aren’t usually permitted to contact you and must contact the attorney instead. If you get a call from a debt collector while an attorney is representing you, give them the attorney’s contact information and tell them to direct their communication to them. 
Debt collectors cannot contact you before 8AM, after 9PM, at inconvenient or unusual places, after asking them to stop.

Who else can a debt collector call about my debt?

Debt collectors are within their rights to contact friends and family in order to find your address, phone number or place of work. However, they can only contact each individual once, and they can’t discuss the details of your debt with anyone but you, your spouse and your attorney. 

What can debt collectors say?

When a debt collector contacts you, they are required to identify themselves as a debt collector. After identifying themselves, they should state the debt they’re calling about and request payment for it. They should also inform you that any information you provide during the communication will be used in the effort of collecting the debt. 

The FDCPA prohibits collectors from engaging in any form of harassment, including communication that is abusive, threatening or deceptive. Examples of harassment include:

  • Using profane language
  • Threatening bodily harm 
  • Misrepresenting what you owe 
  • Making false claims that you could be arrested 
  • Threatening your property
  • Making repeated attempts to contact you or calling you anonymously 

When a debt collector contacts you about a debt, they are required by law to provide specific details about the claimed debt at hand. This includes:

  • The name of the creditor who loaned funds to you or provided a service
  • The amount owed
  • Statement of your right to dispute the debt if you send a written request within 30 days of contact
  • Statement of your right to request the contact information of the original creditor (if it differs from the current creditor) if you send a written request within 30 days of contact

If you speak to a collector and they fail to provide this information in the first instance of contact, they are required to send it to you in writing within five days. 

How much can debt collectors ask for?

A debt collector can only ask for the amount you owe including outstanding fees, charges and unpaid interest—any request for additional payments outside of that scope is prohibited by law.

What to do if your debt collectors ask for more than you owe: Tell them you don't owe that amount. Ask for a verification of debt.

Debt collection and your rights: can I dispute a debt? 

When you speak with a debt collector, you’re allowed to ask for any additional information pertaining to the debt at hand. It’s also within your rights to dispute the debt if you believe it’s been made in error or if you believe the claimed amount owed is incorrect. 

How can I dispute a debt?

If you’ve been contacted by a debt collector claiming you owe a debt and you believe it’s in error, you can contact the collector in writing explaining that you want to dispute the case. If you do this within 30 days of receiving your debt verification notice, the collector cannot contact you while your claim is being investigated. If you fail to do so within 30 days, you can still send a letter to investigate the debt—but the collector will still be legally allowed to continue contacting you.

While you can request investigation of the debt over the phone, doing so permits the collector to continue debt collection activities and they aren’t required to stop contacting you while the debt is verified. That’s why it’s best to always make your disputes in writing. It’s wise to send your letter by certified mail and pay for a return receipt—this allows you to prove the collector received it. 

What is a debt verification notice?

A debt verification notice is the written notice sent by a debt collector in response to your letter of dispute. It includes details about what you owe and to whom you owe it. As mentioned above, debt collectors are obligated to send this if you notify them of your wish to investigate the debt, or otherwise notify you that they will cease their collection efforts (as long as you sent the letter within 30 days of first contact with the collector.) Here’s what it should include: 

  • The amount of debt you owe
  • The name of the creditor 
  • A statement that if you request information about the original creditor, you should receive it within 30 days

The debt verification notice is meant to provide you with enough information about the debt that you can compare it to your own records and determine whether or not you actually owe it. The notice will include different information depending on your grounds for dispute:

  • Identity theft: If you’re investigating the debt because you believe it could be a mistaken identity or instance of identity theft or fraud, the verification notice must include a copy of the original signed contract. 
  • Debt amount: If you’re investigating the amount of the debt, the verification notice should include specific information about the payment amounts made, plus any interest or fees charged. 

Remember that if you make a written request for a debt verification notice, the collector is legally required to cease all debt collection activities and communication with you until they provide the requested information. If they attempt to communicate with you within this 30-day period, they can be held legally responsible for breaching the FDCPA. It’s wise to keep a copy of this letter for your records, and send the letter by certified mail to have proof that the collector received it.

Can I ask a debt collector to stop contacting me?

It is within your rights to request a collector to cease communication with you. It must be done in writing and sent by mail. Again, it’s best to send the letter by certified mail along with a return receipt in order to have the request on record. 

From that point on, the collector may only contact you to inform you that they’re terminating their efforts or to explain their next steps, such as taking the case to court. 

How long can a debt collector legally pursue old debt?

Most debts have a shelf life—after three to seven years, they usually expire. This is known as a statute of limitations, and once it expires, the debt becomes time-barred and the collector can no longer legally force you to pay a debt in court. 

If the statute of limitations has passed — meaning how long a lender can collect that debt — then you're not legally obligated to pay it. Source: Federal Trade Commission.

While it’s true that once that statute of limitations is up, debt collectors can’t take legal action against you—like filing a lawsuit against you for a debt you owe—they can still make attempts to collect the debt by calling you and sending letters.

How long is the statute of limitations?

The exact time frame varies by state, so this depends on where you incurred the debt. It also depends on the type of debt you’re dealing with. If you’re unsure of the specifics for your situation, it’s smart to contact an attorney who handles debt law. You can search for debt collection defense law firms in your area to find a local resource to help you navigate your situation and provide the facts about where you stand. 

Does disputing a debt restart the statute of limitations?

No. If your debt is time-barred because it’s reached its statute of limitations, the only thing that can restart the clock on it is if you make a payment on it (or a partial payment) or even promise to pay the debt, thereby admitting you owe it. Other actions that could restart the statute of limitations include entering into a payment plan or accepting a settlement offer from the collector. 

While investigating your debt won’t restart the statute of limitations, admitting the debt is yours during your dispute will. It’s important to be cautious in your conversations with debt collectors—some will try and get you to admit to the debt without you realizing it, and then the clock restarts. Again, it’s wise to partner with a debt collection law firm to navigate these types of situations, which can get dicey if you aren’t aware of your state’s laws, your rights and the specifics of your situation. 

How do debt collections affect my credit?

Like any unpaid debt or missed payment, having a collection on your account will have a negative effect on your credit score. Lenders want to see that you’re a responsible borrower, and if your debts have gone to collections, they diminish your creditworthiness. 

When you have a debt in collections, it means the original creditor assumed you weren’t intending to pay it (this could be after 60, 120 or even 180 days depending on the lender) and passed it off to a collection agency. Credit bureaus usually categorize these debts based on how late they are, which determines how much your credit score will drop. 

Generally, a debt in collections remains on your credit report for up to seven years. After seven years, the debt should fall off. The most recently added debt accounts on a credit report will have a more severe impact on your credit. But by and large, there’s no one-size-fits-all answer for how an unpaid debt will affect your credit score, because it’s dependent on your unique credit history and the type of debt incurred. Someone who’s only had one debt transferred to collections may have an easier time than someone with repeated collection accounts on record. 

Ultimately, debt collections can be crushing to your credit score if you aren’t careful. Your credit report affects countless areas of your life, from your ability to get a loan or a credit card, to the annual percentage rate (APR) you pay for a line of credit to even employment. Luckily, you aren’t defenseless when facing debt collections: The entire purpose of debt collection laws is to protect you, the consumer. Understanding how they work and knowing your rights can empower you to work out the debt in the best way possible and protect yourself in the process. 

Navigating unpaid debts isn’t something to brush off, and understanding your rights as a consumer is a smart place to start when it comes to handling debt. Read up on how negative items could affect your credit so that you’re prepared for anything life throws at you, and work with a credit repair law firm, like Lexington Law, to get additional help with your credit.


Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

Debt collection laws: know your rights

Debt Collection Laws Title Image

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Debt collection laws exist to protect consumers from unfair debt collection practices. The inception of collection agencies brought with it a prevalence of abusive and deceptive debt collection practices among collectors. 

Since then, a federal law called the Fair Debt Collection Practices Act (FDCPA) was enacted to combat abusive and unethical behavior by debt collectors. The FDCPA places certain limitations on debt collectors and the methods they use to contact debtors. 

It’s important to know your rights and what a debt collector can and cannot do by law. If you’re being contacted by a debt collector, you can protect yourself by understanding what’s within their limitations and what’s not. 

The Fair Debt Collection Practices Act: what are the rules for debt collectors?

People often misunderstand exactly who the FDCPA applies to. The law targets third-party debt collectors: Collection agencies, debt buyers and lawyers who practice debt collection as part of their business are all considered third-party debt collectors. 

The FDCPA covers debts such as mortgages, credit card debt, medical debt, student loans and auto loans. The law outlines the specific limitations of how a debt collector can contact you, and if violated, a lawsuit is warranted within a year against the collector or collection agency. 

When and how debt collectors can contact you, and can a debt collector call you at work?

  • Time: Collection agencies can contact you by phone, mail, fax or email. Debt collectors aren’t permitted to call you at unusual times—they can only call you between 8 a.m. and 9 p.m. your local time. Any contact outside of those hours is an FDCPA violation. 
  • Place: Debtors also can’t contact you in unusual places, such as hospitals, schools or restaurants. While they’re technically allowed to call you at your home or your office, you have the right to tell them not to contact you at your workplace. Similarly, if they know personal calls aren’t permitted at your place of work, they can’t legally contact you while you’re there. 
  • Representation by attorney: If you have an attorney to represent you and a debt collector knows this, they aren’t usually permitted to contact you and must contact the attorney instead. If you get a call from a debt collector while an attorney is representing you, give them the attorney’s contact information and tell them to direct their communication to them. 
Debt collectors cannot contact you before 8AM, after 9PM, at inconvenient or unusual places, after asking them to stop.

Who else can a debt collector call about my debt?

Debt collectors are within their rights to contact friends and family in order to find your address, phone number or place of work. However, they can only contact each individual once, and they can’t discuss the details of your debt with anyone but you, your spouse and your attorney. 

What can debt collectors say?

When a debt collector contacts you, they are required to identify themselves as a debt collector. After identifying themselves, they should state the debt they’re calling about and request payment for it. They should also inform you that any information you provide during the communication will be used in the effort of collecting the debt. 

The FDCPA prohibits collectors from engaging in any form of harassment, including communication that is abusive, threatening or deceptive. Examples of harassment include:

  • Using profane language
  • Threatening bodily harm 
  • Misrepresenting what you owe 
  • Making false claims that you could be arrested 
  • Threatening your property
  • Making repeated attempts to contact you or calling you anonymously 

When a debt collector contacts you about a debt, they are required by law to provide specific details about the claimed debt at hand. This includes:

  • The name of the creditor who loaned funds to you or provided a service
  • The amount owed
  • Statement of your right to dispute the debt if you send a written request within 30 days of contact
  • Statement of your right to request the contact information of the original creditor (if it differs from the current creditor) if you send a written request within 30 days of contact

If you speak to a collector and they fail to provide this information in the first instance of contact, they are required to send it to you in writing within five days. 

How much can debt collectors ask for?

A debt collector can only ask for the amount you owe including outstanding fees, charges and unpaid interest—any request for additional payments outside of that scope is prohibited by law.

What to do if your debt collectors ask for more than you owe: Tell them you don't owe that amount. Ask for a verification of debt.

Debt collection and your rights: can I dispute a debt? 

When you speak with a debt collector, you’re allowed to ask for any additional information pertaining to the debt at hand. It’s also within your rights to dispute the debt if you believe it’s been made in error or if you believe the claimed amount owed is incorrect. 

How can I dispute a debt?

If you’ve been contacted by a debt collector claiming you owe a debt and you believe it’s in error, you can contact the collector in writing explaining that you want to dispute the case. If you do this within 30 days of receiving your debt verification notice, the collector cannot contact you while your claim is being investigated. If you fail to do so within 30 days, you can still send a letter to investigate the debt—but the collector will still be legally allowed to continue contacting you.

While you can request investigation of the debt over the phone, doing so permits the collector to continue debt collection activities and they aren’t required to stop contacting you while the debt is verified. That’s why it’s best to always make your disputes in writing. It’s wise to send your letter by certified mail and pay for a return receipt—this allows you to prove the collector received it. 

What is a debt verification notice?

A debt verification notice is the written notice sent by a debt collector in response to your letter of dispute. It includes details about what you owe and to whom you owe it. As mentioned above, debt collectors are obligated to send this if you notify them of your wish to investigate the debt, or otherwise notify you that they will cease their collection efforts (as long as you sent the letter within 30 days of first contact with the collector.) Here’s what it should include: 

  • The amount of debt you owe
  • The name of the creditor 
  • A statement that if you request information about the original creditor, you should receive it within 30 days

The debt verification notice is meant to provide you with enough information about the debt that you can compare it to your own records and determine whether or not you actually owe it. The notice will include different information depending on your grounds for dispute:

  • Identity theft: If you’re investigating the debt because you believe it could be a mistaken identity or instance of identity theft or fraud, the verification notice must include a copy of the original signed contract. 
  • Debt amount: If you’re investigating the amount of the debt, the verification notice should include specific information about the payment amounts made, plus any interest or fees charged. 

Remember that if you make a written request for a debt verification notice, the collector is legally required to cease all debt collection activities and communication with you until they provide the requested information. If they attempt to communicate with you within this 30-day period, they can be held legally responsible for breaching the FDCPA. It’s wise to keep a copy of this letter for your records, and send the letter by certified mail to have proof that the collector received it.

Can I ask a debt collector to stop contacting me?

It is within your rights to request a collector to cease communication with you. It must be done in writing and sent by mail. Again, it’s best to send the letter by certified mail along with a return receipt in order to have the request on record. 

From that point on, the collector may only contact you to inform you that they’re terminating their efforts or to explain their next steps, such as taking the case to court. 

How long can a debt collector legally pursue old debt?

Most debts have a shelf life—after three to seven years, they usually expire. This is known as a statute of limitations, and once it expires, the debt becomes time-barred and the collector can no longer legally force you to pay a debt in court. 

If the statute of limitations has passed — meaning how long a lender can collect that debt — then you're not legally obligated to pay it. Source: Federal Trade Commission.

While it’s true that once that statute of limitations is up, debt collectors can’t take legal action against you—like filing a lawsuit against you for a debt you owe—they can still make attempts to collect the debt by calling you and sending letters.

How long is the statute of limitations?

The exact time frame varies by state, so this depends on where you incurred the debt. It also depends on the type of debt you’re dealing with. If you’re unsure of the specifics for your situation, it’s smart to contact an attorney who handles debt law. You can search for debt collection defense law firms in your area to find a local resource to help you navigate your situation and provide the facts about where you stand. 

Does disputing a debt restart the statute of limitations?

No. If your debt is time-barred because it’s reached its statute of limitations, the only thing that can restart the clock on it is if you make a payment on it (or a partial payment) or even promise to pay the debt, thereby admitting you owe it. Other actions that could restart the statute of limitations include entering into a payment plan or accepting a settlement offer from the collector. 

While investigating your debt won’t restart the statute of limitations, admitting the debt is yours during your dispute will. It’s important to be cautious in your conversations with debt collectors—some will try and get you to admit to the debt without you realizing it, and then the clock restarts. Again, it’s wise to partner with a debt collection law firm to navigate these types of situations, which can get dicey if you aren’t aware of your state’s laws, your rights and the specifics of your situation. 

How do debt collections affect my credit?

Like any unpaid debt or missed payment, having a collection on your account will have a negative effect on your credit score. Lenders want to see that you’re a responsible borrower, and if your debts have gone to collections, they diminish your creditworthiness. 

When you have a debt in collections, it means the original creditor assumed you weren’t intending to pay it (this could be after 60, 120 or even 180 days depending on the lender) and passed it off to a collection agency. Credit bureaus usually categorize these debts based on how late they are, which determines how much your credit score will drop. 

Generally, a debt in collections remains on your credit report for up to seven years. After seven years, the debt should fall off. The most recently added debt accounts on a credit report will have a more severe impact on your credit. But by and large, there’s no one-size-fits-all answer for how an unpaid debt will affect your credit score, because it’s dependent on your unique credit history and the type of debt incurred. Someone who’s only had one debt transferred to collections may have an easier time than someone with repeated collection accounts on record. 

Ultimately, debt collections can be crushing to your credit score if you aren’t careful. Your credit report affects countless areas of your life, from your ability to get a loan or a credit card, to the annual percentage rate (APR) you pay for a line of credit to even employment. Luckily, you aren’t defenseless when facing debt collections: The entire purpose of debt collection laws is to protect you, the consumer. Understanding how they work and knowing your rights can empower you to work out the debt in the best way possible and protect yourself in the process. 

Navigating unpaid debts isn’t something to brush off, and understanding your rights as a consumer is a smart place to start when it comes to handling debt. Read up on how negative items could affect your credit so that you’re prepared for anything life throws at you, and work with a credit repair law firm, like Lexington Law, to get additional help with your credit.


Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com